The Real Value of Money
As the old saying goes “perception is reality”. When it comes to the perception of money or perceived wealth, this old saying couldn’t be more appropriate. Even if you are jobless or homeless, or both, your “perception” of money has likely undergone a change over the past two years. The urge to spend is gone, and the urge to save is here. We know that buying goods and services is beneficial to our society, but we just can’t take that leap of faith right now.
To better understand our relationship to money, consider a dollar that is obtained in one of five ways, and how we value that dollar. Ranking the following five categories from most important in perceived value to least important, consider:
Wage Earnings. This dollar was earned by your sweat, your labor, and you know what you will have to go through to get more dollars by this method. This dollar is perceived as most valuable.
Investment Income. Although you didn’t earn it, you nevertheless made a wise decision some time ago to obtain this dollar. You congratulate yourself and look for similar opportunities.
Inheritance. Now we’re beginning to straddle the fence between perpetuating the family legacy versus “found money”. In a few cases the inheritor will use the new capital base successfully to build greater wealth. However, in most cases the inheritor was not part of the wealth generating process and the estate proceeds will eventually be squandered on bad investments, and material goods. Such actions have given rise to the expression, “How to make a small fortune? Answer: start with a large one”.
Ill-Gotten Gains. To acquire money through dishonest or criminal activity is not a strategy for wealth building, but rather it is a thrill seeking behavior pattern to see if “I can get away with it”. It would be the exceptional embezzler who wants to enhance his 401-K with his bounty. Laundering money is always a challenge for the most successful crooks. This dollar wasn’t earned, it wasn’t investment income and it wasn’t inherited; consequently, it is not very high in perceived value. It is reminiscent of a Woody Allen movie with dollar bills flying out of the back of the convertible.
TARP Funds. A TARP dollar is everybody’s dollar, but yet it is nobody’s dollar. When you own the printing press, as most central governments do, printing money is the sovereign right of the nation. A little ink, some paper, and how many trillion would you like today? The gold standard has been gone for nearly 80 years, so there is nothing backing up this endless supply of paper. This dollar is considered least valuable, because it is so easy to make another one.